According to an EY-CII report, the recent passage of the Pension Fund Regulatory and Development Authority (PFRDA) Act 2013 will help the sector move forward to realize its full growth potential and cross the USD 1 trillion-mark.

"In line with the country's demographic transition, the need for protecting old-age income security would underpin growth of pensions market in the country as the focus sharpens on expanding the coverage the National Pension System (NPS) in private sector and insurers, even as mutual funds assume greater role in the pensions market," said the report.

Globally, pensions systems are key drivers of the infrastructure sector, providing stability in capital markets due to their long-term outlook, the report said, adding that the same can be replicated here given the huge need for long-term funds for a fast growing domestic economy.

The government had pegged USD 1 trillion investment target for infra sector alone during the ongoing 12th Plan and analysts say that this is impossible due to precarious balance sheets of banks and absence of a deep corporate bond market.

The government expects the private sector to chip in with close to 45 percent of this targeted funding need. The report estimates that private pension funds are likely to contribute 24 percent of the total corpus by 2025, while the pensions and annuity products offered by life insurers are likely to chip in with 16 percent.

Currently, the retirement funds corpus is in range of Rs 12-15 trillion (Rs 12-15 lakh crore), over a one-third of which is locked up in the Employees Provident Fund. The Public Provident Fund and NPS account for about 2.5 percent each of this total corpus.

By 2030, 12 percent or 180 million of the population will be in the age bracket of 60 plus, the report said, adding that for a person earning Rs 10 lakh a year at 30 and retiring at 65, the retirement corpus will cover post-retirement expenses for just about eight years, whereas one can be expected to live much longer, going by the high life expectancy rates.

Calling for better management of inflation, longevity and investment risks, the report said the sector requires expertise of actuaries in designing, pricing and risk management of pension plans.